By Allieu Sahid Tunkara
Sierra Rutile, one of Sierra Leone’s leading mining companies, has unveiled plans to expand mining operations in the country.
Executives of the leading rutile miner in Sierra Leone disclosed Wednesday that the project, dubbed the ‘Gangama Dry Mine Expansion Project’, was designed to enhance its production capacity.
It has been divided into two phases, with the first phase targeting 500 tonnes of Rutile production per hour, while the second phase is expected to double that output. But all this is based on improved market conditions, the officials said.
The total cost of the project is US$77M and Sierra Rutile Board of Directors has approved a US$44M budget for the first phase, disclosed Yves Ilunga, Sierra Rutle`s Chief Financial Officer (CFO). He said the proposed project would create job opportunities for 200 sierra Leoneans.
“Employing more people means pumping more money into NASSIT, government coffers, hence stimulate the economy,” Ilunga said at a press conference held at Sierra Rutles Freetown head office, housed at the Access Bank complex on Siaka Stevens Street.
Ilunga also revealed that phase one of the project would be funded through internally generated cash flows and a loan facility of US$ 30M. He said the miner had entered into a ‘standby loan’ facility to ensure that there was no shortage of funds during the construction period.
Sierra Rutile has also engaged banking institutions locally to source out US$50M as an initial fund raising move for the project, he said.
The Gangama Phase-1 project is expected to drive down the Rutile miner`s total operating cash cost to US$ 595M on average over its five years of operation, officials said, adding that it was poise to cement the company`s position in the global market as the premier low cost producer of high quality rutile.
“The construction of Gangama Phase One will begin this quarter and will last for 12 months with first production targeted for the second quarter of 2016,” Ilunga said. He added that despite the prevalence of the Ebola virus disease in the country, none of their employees were affected.
Mr Ilunga said Iron Ore and Rutile were the key exports in the mining sector and that the Ebola outbreak affected both commodities but assured that his company was determined to maintain its production level for next four years. He said they would start to export 200, 000 tonnes of Rutile annually beginning next year.
Responding to a question with regards the company’s compliance with the country`s taxation policy, Ilunga said Sierra Rutile paid 4% royalty to government annually even though the nationally agreed tax was 3.5%.
He also said they made a direct contribution of US$74M to government through income tax on payment of monthly salaries to employees.
“97% of the company’s workforce is Sierra Leoneans,” Ilunga said, arguing that this accounts for an increase in the country’s gross domestic product (GDP). “If we make more profits, we pay more taxes and if we make less profit, we pay less taxe.”
According to Sierra Rutile’s 2014 end-of-year operational highlights, a copy of which was handed out to journalists, the company produced 114, 163 tonnes of rutile for the year under review, pointing to a decrease of 5% in tonnage when compared to the previous year.
The Sierra Rutile CFO attributed this loss largely to the Ebola related challenges.
“There was a 17% increase in Rutile sales volume translating to 129, 602 tonnes as compared to 2013 during which the company recorded sales of 111, 018 tonnes. Revenue generation reduced to US$117.8M compared to 2013, when the company accrued US$ 123.4M, reflecting a 21% fall in the average realised Rutile price,” an extract of the document reads. The document also indicates that the company experienced significant reduction in total operating cash cost despite the inflation in certain products and services owing to the Ebola outbreak.
As mining companies continue to sell their assets to other corporate entities in the face of financial losses owing to the Ebola epidemic, there have been concerns about how Sierra Rutile fits into this. But its head of corporate executive and government relations, Kabineh Koroma, assured that this will have no effect on the rutile miner.
He said by its corporate structure, it would not be an easy decision for the company to be sold off, considering the [large] number of shareholders and stakeholders involved.
“Even in a situation where revenue continues to reduce, the company will explore business strategies in terms of production methodologies so that the company would continue to survive in the mining sector,” Koroma said in response to a question from the press.
© Politico 30/04/15
